Big, Big Deal On the Table! Here's the issue...

Let us know what you do!

That is definitely one way to look at it. I want to do this because I have plans on building a huge wholesale business in North Jersey and also rehabbing some of my own properties throughout the year. It's not like I want to be a wholesaler and that's it. So this would give me the experience on my first deal and I'll be able to maximize my profit on this deal. I just started a marketing campaign today so I expect to get another 1-2 deals locked up in February that I can wholesale.

I would really like some opinions on how I can structure this partnership.

And I would have the wise counsel of a partner. Think about it. If you were a very experienced rehabber and someone came to you and said they were getting a hard money loan and would cut you in on equity in the deal in exchange for your counsel and nothing more. You turn around in 3 months or so and make $30,000 just for your knowledge. Trust me the guru's would gladly take that and so would the heavy hitting rehabbers and investors.

Try to put this deal together. But remember to include your selling and holding costs when you present the deal to your partner. It is not $150,000 profit. So you will want to have your numbers down to the penny when you present this.

You need several written estimates on the remodel/rehab. Do an Inspection. Get a CMA on rehabed comps in the area. Sold in the last 90 days, currently listed comps and under contract comps. ALL that support a quick selling price of $370,000.

Again remember your holding and selling costs. Base it on a 6 month hold.
Insurance
Utilities
Taxes
Commissions
Closing costs (buying and selling)
Concessions
Oops factor (cost, time overruns, rehab expenses) 3%

These will be 13% or more of your selling price. So $48,100. Don't forget these costs. Providing your remodel estimate is accurate you will NET $91,900 on this deal. $45,900 apiece. Not bad and what a learning experience!!! AND if you can cut the holding and closing costs that is more profit!!

HOWEVER the $35,000 assignment fee is quick and no risk but remember that high of a fee will leave a net profit of $56,900 to your buyer. Present the deal properly!

Good luck and go for it, this isn't a matter of any animal getting fat, this is taking the risk to make a FAIR profit!!

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

My calculations above were based on your partner providing the money based on an equity split. No money costs involved. If YOU are doing a hard money loan on this don't forget to subtract your money costs. If I did the hard money myself I would have NO partner. I would just hire and pay the contractor/rehabber.
Hard money loan for $225,000 will cost you at least $20,000!
So you would net around $70,000 if you did this deal yourself. Or $35,000 if you partner with a rehabber for training purposes.

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

Michael, you're talking my language brother. I agree with your last statement. I wouldn't do a 50/50 split on this deal though. I knew about the holding costs but thanks for letting me know what % to estimate for them. That's why I would get the money myself and pretty much do everything. My partner would only have to bring guidance to the table. I don't know if this is ever done in the real estate world, but it doesn't sound too farfetched. I write them a check for $30,000 for consulting and put about $60,000 away on the deal. The deal would have to be about here to have it be worth me doing. If I wasn't interested in rehabbing I wouldn't even be thinking about this but I think it's a great opportunity for everyone involved and I will learn how to rehab a house from start to finish.

So what do you think is my best option Michael in your opinion. I also know an older guy who loaded from real estate that said if I ever find a great deal he might partner with me. If I get a hard money loan does it cover all the costs including holding costs? I appreciate all the advice and encouragement from everyone. Thanks.

buy the deal myself and go through the process with no partner, I do have the success academy, but I think I might like someone along side of me that has been through the process before. Now if I pay them $30K and I walk away with $40K, I don't think that was worth the time.

So after careful consideration Ive decided to take the money and run so to speak. There will always be more deals to rehab and I can profit in 30 days. Being that this is my first deal I will stick with my original plan of wholesaling this deal. I want to build 1 business at a time and I believe that rehabbing will be in my future. Right now I would like to maximize my wholesale business. Thanks to everyone for sharing their opinions. God bless.

I think it would be a great experience to do a fix and flip, BUT you would need to have your partner lined up already; too many things could go wrong with your first f&f - that's how you learn... with that said, I would assign this one, and look for another property in the future that you could fix and flip...

keep us posted...

Valerie I agree. Thank you, God willing I will wholesale this deal. I've already done some very light marketing, plus I know some cash buyers that want to see it as soon as its locked up. So far 5 people. Thanks again for all the advice and I'll keep everyone posted.

I would like to know on a deal like this, is me making $35,000 and a cash buyer making $$80-$90,000 unfair?

Valerie I agree. Thank you, God willing I will wholesale this deal. I've already done some very light marketing, plus I know some cash buyers that want to see it as soon as its locked up. So far 5 people. Thanks again for all the advice and I'll keep everyone posted.

I would like to know on a deal like this, is me making $35,000 and a cash buyer making $$80-$90,000 unfair?

It is not unfair if your buyer is happy with the spread. Make sure your ARV and repair estimates are accurate! Based on your numbers your Buyer will be buying at 70% of ARV minus repairs.
$370,000 x 70% = $259,000 - repairs $35,000 = A $224,000 buy price. A $34,000 assignment fee for you!

If your buyer wants 65% of ARV you are at:
$370,000 x 65% = $240,500 - repairs $35,000 = $205,500 buy price. A $15,500 assignment fee. Still not bad at all!

So, I would go for a $25,000 fee if it were me, leaving a little margin for my buyer. He will remember me and gladly buy from me next time. I would give him a little extra spread to cover him for extra costs and the place selling for a little less than $370,000. Now if you are ABSOLUTELY sure it will sell for $370,000 and the repairs WILL NOT go over $35,000 you might ask for more. Remember, you are building long term relationships. Someone that will close this deal is someone you want to take care of. Let them know you gave them a discount (less than 70% minus repairs) I would rather make $50,000 on two deals than $35,000 on one.

The final decision is up to you. Have fun and think long term!

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

My opinion is I think you have a great opportunity on your hands. If you're patient and find the right business partner. It wouldn't hurt to share your ideas with your attorney either. I wish you well!

Great input and ideas from everyone. I really appreciate it. I am definitely going to wholesale this one I was just trying to make sure I was asking a fair price for everyone. So I'll sell it for $215k to one of the cash buyers that I know will buy as many as I find. I also have a guy that wants to see it for $230k, he wants to buy it for his daughter. So we'll see how everything goes. I'm excited about 2012. God bless all of your families and businesses.